The Asian Development Bank (ADB) expects Laos ' gross domestic product (GDP) to grow by at least seven per cent in the coming years, despite concerns about rising inflation .

The ADB announced its prediction on Tuesday, saying major investments, new mining and hydropower projects and the expanding tourism sector would ensure the country's GDP achieved a growth rate of between 7 to 8 per cent from now to 2011.
 
“It is projected that high inflation rates will not have a significant impact on the growth forecasts, which will remain in about the same range as in 2008,” said a statement released by ADB's Vientiane office.

Earlier this month Lao Prime Minister Buasone Bouphavanh said the government would try to sustain GDP growth of at least 7.5 per cent in the next fiscal year, although rising inflation rates would pose a challenge.

ADB said major investments such as the Nam Theun 2, Xe Khaman 3, Theun Hinboun and Nam Ngum 2 hydropower projects, coupled with high global demand for gold and copper, would boost Laos ' industrial sector and subsequently the national economy as well.

The sector grew by 15 per cent in 2008, to account for 27 per cent of total GDP, according to ADB.

ADB also forecast tourism would continue to edge ahead of agriculture. Over the past 10 months, the tourism sector has grown at 9.2 per cent, accounting for 34 per cent of GDP, mainly due to private sector investments.

Tourist arrivals are expected to remain at the same level as the government organises a number of cultural events aimed at taking advantage of positive publicity generated by the New York Times newspaper naming Laos as the top place in the world to visit in 2008.

“Rising commodity prices will help offset some sectors affected by oil and food price surges,” the ADB statement said.

ADB predicts inflation in Laos next fiscal year will stay between 10 to 12 per cent, with the current reduction of oil prices in Asia to be shortlive. It expects oil prices will rise above 860,000 kip (US$100) a barrel, pressuring all economies in the region.

The bank said the government had taken a number of steps to address rising inflation including the introduction of a campaign to encourage people to use less energy and issuing monthly fuel rations to public servants. To ensure food security, the government has established a rice bank and placed restrictions on rice exports to neighbouring countries.

ADB said the Bank of the Lao PDR was successfully implementing its monetary policies aimed at maintaining a stable, low inflation rate, a managed floating exchange rate and adequate levels of foreign exchange reserves.